Three Glaring Changes Needed To Fix Obamacare

At a November 14 White house press briefing, President Obama acknowledged that “the roll out has been rough so far.” He was referring to the October 1 launch of the HealthCare.gov website that left Americans shopping for health insurance staring at a frozen web page. Since the Affordable Care Act (ACA) was signed into law, there have been numerous calls for repeal, or at least some modifications.

A law as comprehensive as the ACA most likely will need amending to resolve problems that arise just as the Social Security Act signed by FDR has been regularly amended over the past 78 years. President Obama expressed his willingness to work with Congress to improve the law. “My pledge to the American people is that we’re going to solve the problems that are there,” he said. “We’re going to get it right, and the Affordable Care Act is going to work for the American people.”

Tinkering with the ACA is a dicey proposition as many provisions of the law, much like a tower of Jenga blocks, are interdependent. Full repeal, according to the president, is not on the table. “Keep in mind the old marketplace was not working well. It’s not a place we want to go back to,” said President Obama.

Some immediate fixes however can address problems that are becoming evident as provisions of the new law take effect.

1. Fix the Medicaid gap.

The ACA includes a provision that expands Medicaid eligibility to individuals and families with incomes up to 138 percent of the Federal Poverty Level (FPL). The federal government cannot force states to expand eligibility, but the ACA provided a powerful incentive to do so. Under the law, the federal government would pick up 100 percent of the cost to states for the expansion through 2016, and cover no less than 90 percent of the cost in subsequent years.

The law attempted to coerce states into expanding Medicaid by making all Medicaid funding contingent on a state expansion. In a June 2012 ruling, the Supreme Court ruled this coercion unconstitutional.

As of October 2013, 25 states have not voted to expand their Medicaid programs. Some governors and state legislators are concerned that the 10 percent contribution that would be required beginning in 2017 could wreak havoc on state budgets. This leaves state residents with household incomes between 100 percent and 138 percent of the FPL ineligible for both Medicaid insurance and federal subsidies, which are available to households with incomes between 138 and 400 percent of the FPL. The Kaiser Family Foundation estimates that five million adults in the country fall into this gap.

To close this gap, the ACA could be amended to include a funding formula that would ensure states opting into the expansion would not be unduly burdened by future costs. This may not work as states may still refuse to expand the program for political reasons. By implementing the expansion, politicians may be seen as accepting a law they oppose.

Congress could also revisit eligibility rules for subsidies and place the burden of insuring lower-income residents in the renegade states on U.S. taxpayers nationwide.

President Obama’s assurance that Americans who are satisfied with their current health plans could keep them wasn’t completely accurate. The ACA includes a grandfather clause allowing insurers to continue policies that were in force when the law was signed in March 2010 even though they may not comply with ACA standards. The law does not require insurance companies to continue offering these policies, and the grandfather clause does not include policies with inception dates after the law was enacted. Many Americans are now receiving cancellation or non-renewal notices.

To address what many consider a broken promise on the part of the president, Obama announced at his November 14 press briefing that the administration will extend the grandfather clause through 2014 to include all policies currently in force. “This fix won’t solve every problem for every person,” the president said, “but it’s going to help a lot of people.” To do more, Obama added, would require the work of Congress.

Several bills have been proposed to address this issue. Colorado Senator Mark Udall’s Continuous Coverage Act would allow consumers to keep their current policies, despite cancel notices, through December 2015. Louisiana Senator Mary Landrieu’s Keeping the Affordable Care Act Promise Act will allow consumers to keep their health plan of choice for as long as they wish. It also requires insurers inform policyholders of the deficiencies of their plan. In the House, Michigan Representative Fred Upton has offered the Keep your Health Plan Act, which gives insurers the option of continuing current policies through 2014.

Opponents of these acts believe they would undermine an important goal of the ACA, which is to guarantee citizens will have plans that cover essential health needs. The CBPP believes the Upton plan, which allows insurers to cherry-pick who they insure, will overburden the health insurance marketplace with sick enrollees, driving up the cost of insurance for all.

The percentage of Americans affected by cancelation of individual, non-compliant policies is small. Nearly 50 percent of Americans are insured through employment. Another 30 percent are covered through public programs such as Medicaid and Medicare. More than 15 percent of Americans have no health insurance.[i] Of the remaining five percent that hold non-group policies, most are able to continue with their current plan or are able to find a better, less-costly plan on the new exchanges.

3. Delay the individual mandate penalty for one full year.

The ACA requires, with few exceptions, that everyone have health insurance beginning Jan. 1, 2014. Failure to comply with this mandate results in a penalty. The penalty for 2014 is small, $95 or one percent of income, but many feel this penalty should be delayed until 2015 to give consumers more time to research their health insurance options.

The Obama administration already has delayed the business mandate penalty, which assesses a $2,000 per employee fine (excluding the first 30 employees) on businesses with 50 or more employees that fail to offer affordable health insurance benefits. It seems reasonable to extend the same extension to individuals while other aspects of the law’s implementation are sorted out.